Point Austin: Bernanke Speaks

The Fed chairman visits, and the news is very mixed

Point Austin
It wasn't Ben Bernanke's fault that he dropped into the Downtown Hilton on the same day that the U.S. was officially diagnosed as undergoing a "recession" that, according to those quick-thinkers at the National Bureau of Economic Research, began in December 2007. Nor that the stock market had responded to this clarifying declaration by skidding another 680 points. Had those pieces of overripe bad news held off for another day, the Federal Reserve chairman was still going to deliver the same speech – heavy on somber-wonk crisis policy, light on prognostication. He recited it sonorously and letter-perfect, as any deviation from his text would have been haruspicated in a manner that was once reserved for the steaming innards of sacrificial bulls. As it is, he made the unremarkable declaration that additional federal funds interest-rate cuts (from the diminishingly visible 1%) "are certainly feasible" – rather like announcing he occasionally employs an umbrella in thunderstorms – and by Monday night, there were several hundred breathless worldwide repetitions of the phrase on Nexis, even though his explicit point was that at that level, the likely effects of conventional interest-rate cuts are "obviously limited."

Whatever else is true about being Fed chairman, it must be simultaneously tempting and discomfiting to anyone to suddenly find oneself the designated Delphic oracle of international finance. Bernanke's predecessor, the truly loony Ayn-Rander Alan Greenspan, relished that role and spoke in a bureaucratic dialect so opaque that his awestruck devotees are still arguing over the punctuation. Bernanke, although clearly an ingrained free marketeer, seems not so ideologically hidebound nor as pompous as Greenspan and is thereby willing at least to speak directly if not with great revelation. His oration Monday, delivered to a couple of thousand attentive Chamberites, had roughly three parts: 1) We've been doing the best we can under difficult circumstances, with measurable success at holding off disaster; 2) it's going to get worse before it gets better; and 3) there are a few things we haven't tried yet but expect we'll have to.

Perry's Two Cents

The address was apparently well-received by the assembled members and friends of the Austin Chamber of Commerce – which we should not forget is a historical euphemism for the Club of Bosses and Major Property Owners and whose direct personal interest in the soundness of investment banking is rather greater than that of the rest of us. Although the formal occasion was the annual Austin Economic Forecast, Bernanke only passingly acknowledged the "strong and diversified" Texas economy before plunging into the "economic and financial challenges" facing the entire nation.

It was just as well. He had been preceded by Gov. Rick Perry, who delivered a thumbnail version of his standard "The Texas Economy Is Booming" speech. Next to Bernanke, Perry sounded roughly like the mayor of Paint Creek about to cut the ribbon on the new branch bank. Virtually oblivious to the historical moment, the governor credited the state's "lower taxes and less regulation" for our relative good fortune and congratulated the audience for doing its economic best "when the heavy hand of government is off their backs and out of their pockets." Perhaps Perry hasn't yet noticed that the guest of honor and the rest of the federal government have been very expensively bailing water – and bailing out sinking financial ships – largely as the result of eight years of ideologically driven negligence and deregulation. Bernanke has been calling explicitly (as he did Monday) for a reversal of those mistakes.

Perry had begun even more strangely by taking a cheap shot at the Top 10% university admissions law – calling it the worst-conceived idea he'd heard of until the football Bowl Championship Series. He finally acknowledged that Texas cannot avoid the economic challenges facing the nation but said he has "faith that God will continue to bless Texas." Somebody better.

The Long View

I suspect that Bernanke's audience was not entirely deaf to the irony of that juxtaposition and that most of us have already been affected directly or indirectly by the crisis; certainly it's already hit my family, here and elsewhere. Like a lot of folks, I confess I was also listening somewhat for reassurance for the coming year. There wasn't much. Ber­nan­ke had nothing to say about the automobile industry (admittedly not quite his bailiwick) and mentioned unemployment only statistically, as another dire economic marker that has steadily been getting worse.

He was a little more forthcoming in the brief audience Q&A. He handily fielded a question on whether "the policy of 'too big to fail'" isn't "inconsistent with capitalism" by saying simply, "That's not a policy; it's a problem" that has to be addressed by regulators once the crisis has passed. Of course, what is called "capitalism" in these discussions is roughly dependent on whose ox is being gored; when it's everybody's oxen, suddenly we're all Keynesian social democrats. And calling on his experience as an economic historian, he flatly dismissed the increasingly common comparison of this crisis to the Great Depression. "There's no comparison," Bernanke said. "There is an order of magnitude difference in what we've seen and the slowdown we're seeing in this economy and the financial stress we're seeing in this economy and what happened in the 1930s," recalling 25% unemployment and one-third of banks closing during the Thirties. "Let's put that out of our minds," he said. "There is no comparison in terms of severity."

Well, when we're grasping at straws, small comfort is better than none. The chairman doesn't look like he's getting a lot of sleep, and when asked how he'd like to be remembered, he joked, "I'm hoping that the [Wash­ing­ton] Nationals would eventually win the World Series." More seriously, he continued: "I hope it would be that we got the financial crisis under control, that we set a groundwork for ... strong growth in our economy, and that we began a process of healing. ... It's going to take awhile."

Good luck to him. Even the oracle can't say how long before we get better.

You can check out Ben Bernanke's Austin speech for yourself on the Fed Reserve's website, www.federalreserve.gov/newsevents/speech/bernanke20081201a.htm. "Point Austin" will be on vacation for two weeks, but you can send your own points to mking@austinchronicle.com.

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Ben Bernanke, Alan Greenspan, Austin Chamber of Commerce, Rick Perry

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